The US Department of Veterans Affairs (the VA) published a new final rule on September 18, 2018. The new rule radically alters eligibility requirements for need-based VA pensions. This article summarizes and explains new need-based VA pension eligibility requirements that take effect on October 18, 2018.

Affected Veterans & Family Members

The revised pension requirements will affect qualifying veterans, spouses, surviving spouses, and parents of veterans, all of whom this article addresses with references to “veterans.” The need-based VA pensions include financial assistance for homebound veterans and veterans needing aid and attendance of another person.

Pre-October 2018 Need-Based VA Pension Eligibility Requirements

The VA provides basic information about need-based VA pension eligibility requirements on its website at https://www.benefits.va.gov/PENSION/index.asp. Eligible veterans under the new and existing rules must have served at least 90 days of active duty, including at least 1 day of wartime service (the VA website has a web link to a list of periods of wartime). Veterans serving after September 7, 1980, must generally have served at least 24 months or the full period of enlistment or commission. Veterans must also have income and wealth levels below income and “net worth” standards, and they must fall within 1 of these categories:

Age 65 or older with limited or no income

Totally and permanently disabled

A patient in a nursing home receiving skilled nursing care

Receiving Social Security Disability Insurance

Receiving Supplemental Security Income (SSI)

The VA stated in its rule change announcement, “the way that net worth decisions are made now is often inconsistent and arbitrary.” (Federal Register / Vol. 83, No. 181, page 47248). Additionally, the VA rules unintentionally encouraged veterans to transfer assets to family members in order to reduce their wealth levels and meet the net worth requirements. Unfortunately, the health of veterans that meet the health needs requirements often declines until veterans required nursing home care, and their gifts to qualify for need-based VA pensions disqualify them for Medicaid benefits (see article on this subject that https://www.hawkinselderlaw.com/attention-veterans-avoid-va-pensionmedicaid-eligibility-traps/).

Most basic need-based VA pension requirements, including active duty service requirements, will remain in effect after the October 2018 rule change. Major eligibility rule changes include:

Net Worth Limit = $123,600:

includes Social Security and other annual income

excludes the applicant’s primary residence and up to 2 acres

excludes unmarketable property

allows deductions for certain deductible expenses

Transfer Penalty – eligibility disqualification for making gifts and certain other asset transfers:

excludes gifts and transfers made before the 3-year look-back period

transfer penalties do not last longer than 5 years

certain gifts and transfers do not trigger transfer penalties

Concerns about the New Rule

Critics worry that the new VA
pension requirements will not deal compassionately with veterans. Issues
affecting veterans facing special health and cost-of-living problems raise
particular concerns. The new standardized net worth limit provide clarity, but
the clarity may eliminate compassionate flexibility.

The VA’s rule change publication
includes this general policy statement about transfer penalties:

VA pension is a needs-based benefit and is not intended to
preserve the estates of individuals who have the means to support themselves.

Accordingly, a claimant may not create pension entitlement
by transferring covered assets. VA will review the terms and conditions of
asset transfers made during the 36-month look-back period to determine whether
the transfer constituted transfer of a covered asset.

However, VA will disregard asset transfers made before
October 18, 2018.

Unscrupulous annuity promoters
have advised many veterans in recent years to create irrevocable trusts,
purchased annuities, and transfer assets to family members. Elder law attorneys
have advised veterans against those strategies to avoid Medicaid transfer penalties.
The VA says in its publication of the new rule that it will extend grace to
veterans for transfers made “as the result of fraud, misrepresentation, or
unfair business practice related to the sale or marketing of financial products
or services for purposes of establishing entitlement to VA pension.”